Russia Throws Down the Gauntlet Over Pipeline Projects
By Ben Angel
2009.10.26 17:52
The race between Russia and the European Union over energy pipeline
corridors has become a little more intense after a series of recent events
in Turkey.
Months of delays in negotiations between Turkey and Azerbaijan over Turkey’s
price for transmitting gas to Europe through the Nabucco gas pipeline and
the Interconnector Turkey-Greece-Italy gas pipeline have culminated in a row
between Baku and Ankara. This seemed to coincide with the recent
rapprochement between Azerbaijan’s ally Turkey, and its enemy Armenia. As
Turkish-Armenian rapprochement began to appear inevitable, President Ilham
Aliyev of Azerbaijan arranged a deal with Moscow during a Commonwealth of
Independent States meeting in which he would direct the sale of 500 million
cubic metres of gas from the newly tapped Shah Deniz Phase 2 gas field
reservoir (a large deposit located below the Shah Deniz Phase 1 reservoir
off Azerbaijan in the southern Caspian Sea) in 2010, and threatened to
extend this deal into a permanent supply agreement. This would divert gas
from the South Caucasus gas pipeline (which supplies gas to Georgia) and
bypass Turkey.
A week later, after the signing of the Ankara-Yerevan rapprochement,
President Aliyev announced on Azerbaijani national television that he would
no longer subsidise gas sold to Turkey, issuing further threats against
Western efforts to use the Turkish pipeline to deliver gas to Europe.
Negotiations have been quietly proceeding since then to restore Azerbaijan’s
confidence in Turkey as a transportation corridor partner.
Then last week Russia, in a race to push through the Gazprom-Eni backed
South Stream gas pipeline before the EU’s Southern Corridor can be
constructed jumped a major hurdle when Turkish Economy Minister Taner Yildiz
announced on Tuesday that his Government will permit the Russian-Italian
project to lay pipes within Turkish territorial waters. This will allow
South Stream to bypass territorial waters controlled by Ukraine.
These events have brought the race between the Southern Corridor and South
Stream to the forefront of international attention, and moved Russia into a
neck-and-neck chase with the Europeans, in which it may be even a bit ahead,
in the race to build the first pipeline.
Europe’s Entry: The Southern Corridor
The Southern Corridor is Europe’s latest effort to diversify its energy
sources and move beyond dependence on Russia. To be implemented by the
Caspian Development Corporation (CDC), a body devised last November to serve
as a `one-stop shop’ for the transport of gas from the Caspian Sea and
Central Asia to Europe, the Southern Corridor concept will involve using the
existing South Caucasus gas pipeline, the Nabucco gas pipeline connecting
Turkey and Austria, the Interconnector Turkey-Greece-Italy gas pipeline, the
proposed White Stream project connecting Georgia, Ukraine and Romania and
the Trans-Adriatic gas pipeline connecting Romania and northern Italy to
deliver gas to Europe along three corridors (Turkey-Austria, Turkey-Italy
and Georgia-Romania-Italy).
Southern Corridor diversifies Europe’s energy providers from the east. Since
the West-Siberian gas pipeline was extended to Western Europe in the 1980s,
Russia has dominated the European energy market. Today, the European Union
receives 50 percent of its gas and 30 percent of its oil supplies through
the Russian pipelines.
Tapping Caspian Sea oil and gas resources was seen as the best remedy to
reduce Russian control of Europe’s energy market. In 1994 the BP Company
(formerly British Petroleum) led a consortium of 10 oil firms in forming the
Azerbaijan International Operating Company (AIOC – likely a play on BP’s
original name: the Anglo-Iranian Oil Company). The new AIOC began developing
the Azeri-Chirag-Gunashli (ACG) oil fields in the central Caspian Sea.
Similarly, BP worked with a smaller group of companies in a joint venture to
develop the Shah Deniz offshore gas field farther south.
Today, Caspian oil runs through Georgia and Turkey in the
Baku-Tbilisi-Ceyhan (BTC) pipeline (the second largest oil pipeline in the
world after the Druzhba), and its gas goes through the South Caucasus
pipeline (which follows the same route as far west as Erzurum). In the
future, it is planned to send Caspian gas from eastern Turkey through the
Southern Corridor pipelines. The most well-known component of the Corridor
is the proposed pipeline from Turkey to Austria to be built by Nabucco Gas
Pipeline International GmbH (named after a Giuseppe Verdi opera), a
consortium led by Austria’s OMV energy firm. This pipeline would supply
southeastern Europe and connect Caspian gas with Western European energy
markets.
Russia’s Entry: South Stream
Russia is racing in with a pipeline of its own to supply gas to southeastern
Europe and ensure an equally reliable connection with Western Europe. With
its South Stream, and corresponding Nord Stream, gas pipelines Moscow plans
to eliminate its own reliance on its Western neighbours.
Russia began facing difficulties transmitting gas to the West when newly
independent Ukraine diverted it from pipelines passing through its
territories. Russia attempted to halt gas supplies to Kiev several times for
its alleged failure to pay for what it had overtly imported, but each time
the Ukrainians simply diverted gas from the pipelines going to Europe to
make up the shortfall.
Following the 2004 Orange Revolution in Ukraine and after a 2007 dispute
over Transneft’s attempt to normalise the price of oil sold to Belarus,
Russia’s quest for another option became even more urgent. Gazprom selected
two projects: Nord Stream, a Baltic subsea pipeline that would carry gas
from St. Petersburg to Germany, and South Stream, a Black Sea subsea
pipeline that would carry gas from the Krasnodar Region to Bulgaria.
The South Stream project is useful to Russia not only as a more reliable
means of delivering gas to the market, but, as Russian Prime Minister Putin
demonstrated this week, an effective diplomatic weapon. The Russian
newspaper Kommersant stirred fears internationally on Tuesday by suggesting
that the timing of the Russian-Turkish agreement meant that Bulgaria, which
has elected the relatively anti-Moscow Citizens for European Development
(GERB) Party under Prime Minister Boyko Borissov, would be excluded from the
South Stream project for refusing to cooperate on other energy projects. In
a more notable example of non-cooperation, fellow GERB Party politician and
Mayor of Burgas Dimitar Novikov echoed on Greek television the unpopularity
of the pipeline. `Our priorities are projects related to the development
of
tourism and light industry, not those which threaten the environment such as
the Burgas-Alexandropoulis oil pipeline,’ he said.
Putin has arranged with Turkish Economy Minister Yildiz the use of the
proposed Turkish Samsun-Ceyhan pipeline, replacing the Bulgarian-Greek
bypass route, but the threat to take the gas pipeline around Bulgaria has
proved to be either inaccurate reporting or a bluff, at least for the time
being. Still, Turkish cooperation removes a bargaining chip from Ukraine,
which had earlier sought to trade its approval for the South Stream passing
through Ukrainian territorial waters in return for Russian approval for
Ukraine’s White Stream subsea gas pipeline to pass from the Georgian
coastline through Russian territorial waters to Ukraine.
Turkish cooperation has also reportedly helped speed up the South Stream
project’s timetable, so that it would be completed before the rival Nabucco
pipeline. Media observers such as The Moscow Times have suggested that the
threat of the speedy construction of such a bypass of the Ukraine-based
West-Siberian gas pipeline might be designed to damage Ukrainian President
Viktor Yushchenko’s chances of reelection at the beginning of 2010.
From: Emil Lazarian | Ararat NewsPress